Why Interest Rates Are Rising Everywhere—Except Your Savings Account
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Why Interest Rates Are Rising Everywhere—Except Your Savings Account

Many banks continue to offer meagre yields on savings accounts, but it can pay off to shop around

By JOE PINSKER
Tue, Oct 4, 2022 8:44amGrey Clock 4 min

The US Federal Reserve’s campaign to fight inflation by raising interest rates seems to have reached nearly every corner of the economy except one: Americans’ savings accounts.

Mortgage rates doubled this year to nearly 7%, and it has become more expensive to get a car loan or carry a credit-card balance. Yet the interest on savings accounts barely budged. In March 2020, the average annual yield on a standard savings account was 0.1%, according to Bankrate.com. It fell to a pandemic low of 0.06% after Americans’ personal saving rate peaked, and is now up to a wan 0.14%.

US commercial banks held $16.8 trillion in deposits as of June, according to the Federal Deposit Insurance Corp. Much of that vast sum sits in individual checking and savings accounts, earning little interest and losing significant value to inflation. There are savings accounts that yield as much as 3%, for those willing to shop around.

At a hearing on Capitol Hill last month, Rep. Michael San Nicolas (D., Guam) remarked on depositors’ underwhelming returns to the leaders of the nation’s largest banks. “One of the only silver linings in a rising interest rate environment is that savers are supposed to be rewarded for their savings,” he said. “They’re supposed to see the interest that they earn on their savings accounts go up.”

In response, the bank chiefs said that they expected the interest rates on their customers’ deposits to increase in the future, based on the actions of the Fed and their competitors.

The country’s largest banks can keep payouts on savings accounts low because they seem to have plenty of deposits to cover their lending businesses for now and don’t need to attract more by raising interest rates.

Some other banks are offering some of the most generous yields in years, but those still paying out meagre interest can count on customer inertia: We fail to take advantage of better deals, because switching banks seems like a headache.

Were that dynamic to change—that is, if enough consumers took their money elsewhere in search of higher returns—banks would be compelled to raise interest rates or make fewer loans, said Philipp Schnabl, a professor of finance at New York University’s Stern School of Business.

Some banks, particularly online ones, have inched up yields in response to the Fed’s rate increases. The annual interest on an online savings account at Ally Bank rose from 0.5% in May to a chunkier 2.1% last month. As of Sept. 30, according to Bankrate, the highest-yield nationally available, FDIC-insured account was UFB Direct, which was paying out 3.01%.

Greg McBride, Bankrate’s chief financial analyst, advises shopping around. “If you’re looking in the right place, it is the best you’ve seen since 2009,” he said. “If you’re just standing pat at the same place you’ve always had your savings, it probably doesn’t look a whole lot different than 2021.” (Bankrate earns money when customers open accounts using offers on its website.)

Even high-yield savings accounts are a weak buffer from 8.3% year-over-year inflation, but their annualised returns of 2% or 3% still beat a return of 0.01%. The median balance of a transaction account, which includes checking, savings and other accounts, was $5,300 in 2019, according to the Federal Reserve, the latest data available. Receiving 3% interest on that balance, versus 0.01%, would work out to a difference of about $160 a year—not an enormous amount of money, but also not bad compensation for opening a new account, which can typically take about 15 minutes of work.

People with much larger balances stand to gain more, yet those depositors don’t always bother to move their money. Tony Chan, a financial adviser in Orange, Calif., said he recently met with a new client who had about $1.2 million in an account earning 0.01% a year, or roughly $120. Mr. Chan said the money was previously invested in the stock market, but the client sold his holdings last year out of fear and has been too busy to find a good place to put it.

Mr. Chan recommended the client move most of the money into a higher-yield account and the rest into certificates of deposit. He estimates that these switches would yield at least $36,000 in interest annually.

Depositors’ inertia can be strong, to their detriment. In a study published in 2021, researchers analysed the behaviour of customers at five U.K. banks. The average customer stood to gain £123 a year, or about $190 at the time, from moving their money to a higher-yield account, yet the researchers found that switching is “rare” and that even customers with relatively large balances were no more likely to do so.

In a follow-up survey, 66% of respondents said that switching accounts would be worthwhile for them if they gained at least £100 in annual interest. But in one subset the researchers studied, despite the fact that 26% of customers could have gained at least that much by switching, only 3.5% actually switched.

“The biggest reason consumers don’t seem to reoptimise their finances seems to be a belief that it will be a huge hassle,” said Christopher Palmer, a professor of finance at MIT’s Sloan School of Management and a co-author of the study. The study also found that customers tend to overestimate how much of a hassle it actually is, and underestimate how much their interest rate might increase.

Financial advisers consider it prudent for people to cart their money elsewhere if they can find a better offer. Savers can also consider safe high-yield alternatives to bank accounts, such as government I Bonds.

Mr. Chan advises clients to keep about one month’s worth of expenses in a checking account and to seek out a high-yield savings account for cash that they want access to in the next couple of years but don’t need to draw on imminently.



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EV Home Charging: I Did the Math—and Saved Hundreds of Dollars

High-voltage outlets, smart chargers, money-saving utility programs: what to know about charging EVs at home

By JOANNA STERN
Thu, Mar 28, 2024 4 min

Things I miss about my local gas station:

That’s it. That’s the list. OK, fine, I did enjoy the communal squeegees.

This week marks six months since the grand opening of my home electric-vehicle charging station. Congrats to the whole team! (Me and my electrician.) Located between my garage door and recycling bin, it’s hard to beat for the convenience. And also the price.

If you’ve followed my ad-EV-ntures, you’re aware of my feelings about the hell that is public EV charging , at least before Tesla started sharing its Superchargers with its rivals. Truth is, I rarely go to those public spots. The vast majority of EV owners—83%—regularly charge at home, according to data-analytics company J.D. Power.

I already discovered many EV virtues , but I didn’t quite grasp the cost savings until I tallied up half a year of home-charging data. In that time, I spent roughly $125 on electricity to drive just under 2,500 miles. In my old car, that would have cost me more than twice as much—assuming gas held steady at around $3.25 a gallon . And I was charging through the winter, when electricity doesn’t stretch as far in an EV.

Rebates and programs from my state and utility company sweeten the deal. So I will be able to take advantage of discounted electricity, and offset the cost of my charger. The same may be available to you.

But first, there are technical things to figure out. A 240-volt plug? Kilowatt-hours? Peak and off-peak charging? While other people are in their garages founding world-altering tech companies or hit rock bands, I’m in there finding answers to your home-charging questions.

How to get set up

Sure, you can plug your car into a regular 120-volt wall outlet. (Some cars come with a cable.) And sure, you can also simultaneously watch all of Netflix while it charges. It would take more than two days to fill my Ford Mustang Mach-E’s 290-mile battery via standard plug, known as Level 1 charging.

That’s why you want Level 2, which can charge you up overnight. It requires two components:

• A 240-volt electric outlet. Good news: You might already have one of these higher-powered outlets in your house. Some laundry dryers and other appliances require them. Bad news: It might not be in your garage—assuming you even have a garage. I realise not everybody does.

Since my suburban New Jersey home has an attached garage, the install process wasn’t horrible—or at least that’s what my electrician said. He ran a wire from the breaker panel in the basement to the garage and installed a new box with a NEMA 14-50 outlet. People with older homes or detached garages might face trickier wiring issues—more of a “Finding NEMA” adventure. (I apologise to everyone for that joke.)

My installation cost about $1,000 but the pricing can vary widely.

• A smart charger. Choosing a wall charger for your car is not like choosing one for your phone. These mini computers help you control when to start and stop charging, calculate pricing and more.

“This is not something where you just go to Amazon and sort for lowest to highest price,” said Tom Moloughney, the biggest EV-charging nerd I know. On his website and “State of Charge” YouTube channel , Moloughney has reviewed over 100 home chargers. In addition to technical measurements, he does things like freezing the cords, to see if they can withstand wintry conditions.

“Imagine you are fighting with this frozen garden hose every time you want to charge,” he said.

One of his top picks, the ChargePoint Home Flex , was the same one my dad had bought. So I shelled out about $550 for it.

Just remember, if you want to make use of a charger’s advanced features—remote controls, charging updates, etc.—you’ll also need strong Wi-Fi in your garage.

How to save money

I hear all you money-minded WSJ readers: That’s at least $1,600 after getting the car. How the heck is this saving money? I assumed I’d recoup the charging-equipment investment over time, but then I found ways to get cash back even sooner.

My utility provider, PSE&G, says it will cover up to $1,500 on eligible home-charger installation costs . I just need to submit some paperwork for the rebate. In addition, New Jersey offers a $250 rebate on eligible charger purchases. (Phew! My ChargePoint is on the list.) If all is approved, I’d get back around $1,250. Fingers crossed!

I didn’t know about these programs until I started reporting on this. Nearly half of home-charging EV owners say they, too, are unaware of the programs offered by their electric utility, according to a 2024 study released by J.D. Power . So yes, it’s good to check with your provider. Kelley Blue Book also offers a handy state-by-state breakdown.

How to charge

Now I just plug in, right? Kinda. Even if you have a Level 2 charger, factors affect how many hours a fill-up will take, from the amperage in the wall to the current charge of your battery. Take Lionel Richie’s advice and plan on charging all night long .

It can also save you money to charge during off-peak hours.

Electricity costs are measured in kilowatt-hours. On my basic residential plan, PSE&G charges 18 cents per kWh—just 2 cents above the 2023 national average . My Mustang Mach-E’s 290-mile extended-range battery holds 91 kilowatt-hours.

Translation: A “full tank” costs $16. For most gas-powered cars, that wouldn’t cover half a tank.

And If I’m approved for PSE&G’s residential smart-charging plan, my off-peak charging (10 p.m. to 6 a.m. and weekends) will be discounted by up to 10.5 cents/kWh that I’ll get as a credit the following month. I can set specific charging times in the ChargePoint app.

Electricity prices fluctuate state to state but every expert I spoke to said no matter where in the country you live, home charging should cost less than half what gas would for the same mileage. (See chart above for a cost comparison of electric versus gas.) And as I’ve previously explained , fast charging at public stations will cost much more.

One big question: Am I actually doing anything for the environment if I’m just taxing the grid? Eventually, I’d like to offset the grid dependence—and cost—by powering my fancy little station with solar panels. Then, I’ll just be missing the squeegee.

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